Uninsured drivers, beware! State officials want you

When it comes to uninsured motorists, Oklahoma isn’t doing so well. Despite a state law that mandates basic liability insurance for all drivers, 24 percent of Oklahoman motorists lack coverage. That's the fourth highest rate of uninsured motorists in the country, according to the Insurance Research Council.

To help reverse that trend, state Rep. Steve Martin has introduced a bill that would let an Oklahoma police officer stop a motorist with the sole purpose of verifying that his or her auto insurance is up to date. If passed, the law would be the first of its kind in the country.

But the legislation has encountered a lot of opposition as lawmakers and industry experts question everything from the bill’s constitutionality to its potential effectiveness. The bill also has prompted many observers to wonder how Oklahoma and other states can do a better job of making sure drivers are carrying auto insurance.

“Uninsured motorists are certainly a problem, because when they do damage — to the car or to another driver — there’s little recourse for victims to get reimbursed,” says Eli Lehrer, vice president of the nonprofit research center The Heartland Institute. “That being said, I don’t necessarily see this approach in Oklahoma catching on.”

Mississippi leads the uninsured pack

According to the Insurance Information Institute, close to 14 percent of U.S. drivers were uninsured in 2009, a slight increase from the 12.7 percent reported a decade earlier. The magnitude of the uninsured motorist dilemma varies significantly from state to state, however.uninsured motorists

A 2009 report by the Insurance Research Council indicated that the five states with the highest percentage of uninsured drivers were Mississippi, 28 percent; New Mexico, 26 percent; and Oklahoma, Florida and Tennessee, 24 percent each.

On the other hand, the five states with the lowest percentage of uninsured drivers were Massachusetts and Maine, 4.5 percent each; New York, 5 percent; and Pennsylvania and Vermont, 7 percent each.

Even more perplexing than the disparity of these figures is that there’s virtually no correlation between uninsured motorists and the laws mandating coverage.

Today, 49 states and the District of Columbia, require drivers to purchase standard auto liability insurance. For a full list of state requirements, visit the Insurance Information Institute website. The only exception is New Hampshire, which doesn’t mandate the purchase of insurance but does insist that drivers satisfy a financial responsibility requirement. Instead of paying monthly premiums, uninsured drivers in New Hampshire must prove that they're capable of paying for damages in case of an accident.

No 'magic bullet'

Interestingly, the number of uninsured drivers in New Hampshire is a little more than 10 percent, according to the Insurance Information Institute.

“There is no correlation between compulsory insurance and the number of uninsured motor vehicles on the highway,” says Marianne Allard, chairwoman of the Insurance Industry Committee on Motor Vehicle Administration, a nonprofit advisory group. “There are simply too many other socioeconomic factors that go into a higher uninsured motorist rate.”

The same can be said for efforts aimed at enforcing these laws. For instance, Allard points out that four of the six poorly ranked states (New Mexico, Oklahoma, Florida and Alabama) have some sort of insurance reporting or verification program in place.

Alabama, for example, randomly selects drivers each year and asks them to provide their auto insurance information to the Department of Motor Vehicles. If the information isn’t correct — or isn’t provided at all — the vehicle’s registration is suspended and first-time offenders can face fines as high as $500. Still, 22 percent of Alabama drivers don’t have auto insurance.

Conversely, two of the five top-ranked states for low uninsured motorist rates (Maine and Vermont) don’t have any such programs in place.

“The enforcement of these laws is very different from state to state,” Lehrer says. “In my home state of Virginia, for example, you simply sign a document saying you have or will secure auto insurance, and in my experience it’s never checked at traffic stops. But in Louisiana, for instance, they can tow your car if you don’t have proof of insurance.”

According to Allard, recent studies of states with reporting programs in place for at least five years showed that two-thirds of those states notched an increase in the uninsured motorist rate and only one-third saw a decrease.

“Having been in this industry for many years, I can’t say there’s a magic bullet out there,” says Allard, who works in the corporate compliance division at Travelers Insurance. “I’ve closely watched states that do enforce and states that don’t, and no one has successfully adopted a program that reduces the uninsured motorist rate.”

Tackling the problem

When it comes to tracking down uninsured motorists, the two most widely used tactics are state databases and insurance databases.

With a state-based model, insurance companies must submit information about their customers to state motor vehicle departments. That information then goes into a database that state officials can tap to determine whether a driver is insured.

“But I don’t think a state’s motor vehicle department is the right group to determine if a vehicle is insured,” Allard says. “That’s like asking a restaurant to keep a list of everyone’s credit limits and checking that list every time someone pays with a credit card.”

Another problem with this model is that the information stored by motor vehicle departments oftentimes isn’t in sync with data kept by insurance companies. For instance, a vehicle may be registered under the name Michael Jones Smith but the insurance company may know him as Mike Smith.

“The business of a motor vehicle department and an insurance company are in no way related, and the information the DMV stores is far different than the data we collect as an insurance agency,” Allard says. “As a rule of thumb, 25 percent of the data we send won’t match with the DMV.”

uninsured motorists

With an insurance-based model, states reach out directly to a driver’s insurance company to obtain information about the policyholder.

No state has fully carried out a system relying on the insurance-based model, but some states have begun using a combination of methods. For example, California maintains an insurance coverage database but supplements that information with data from a third-party vendor. That vendor maintains an online system that provides real-time verification for the state’s motor vehicle department. This means that if a state official needs to check a vehicle’s insurance status, he or she can access that information immediately. At 15 percent, California’s uninsured motorist rate isn’t stellar, but it’s a lot better than the 30 percent peak in 1995.

High-tech help

California is trying to take the use of technology one step further. A state legislator has introduced a bill that would let drivers provide proof of coverage via their mobile devices (such as a smartphones or tablets), alleviating the hassle of carrying around — and looking for — a paper insurance card. A similar bill in Idaho recently sailed through the Senate Transportation Committee; Arizona, Maryland and Mississippi are working on their own versions.

Texas is another state on the cutting edge of verification.

Through its TexasSure program, law enforcement officials, county tax officials and vehicle inspectors can confirm whether a vehicle carries the mandatory coverage. Keeping the vehicle insurance database up to date is a combined effort of several state agencies.

According to the Insurance Information Institute, real-time verification systems in Texas, Nevada, Oklahoma and Wyoming were operating at the close of 2011, and lawmakers in five other states (West Virginia, Montana, Louisiana, Arkansas and Alabama) had passed measures allowing these systems but had not launched them.

“Given the scope and complexity of the problem, I can’t really imagine that the primary enforcement of insurance mandates — like what they’re proposing in Oklahoma — will ever be a major threat to drivers who are uninsured,” Lehrer says. “Efforts to reduce the number of uninsured motorists are sure to continue, and that will probably happen through real-time verification systems.”

Guarding against the uninsured

As states continue to wrestle with the problem of uninsured motorists, Mike Barry, a spokesman for the Insurance Information Institute, says insured drivers must protect themselves.

“For motorists who do follow the law, I would suggest making sure they have uninsured or underinsured motorist coverage,” Barry says. “That protects you, the honest driver, from any negative financial consequences or encounters with uninsured or underinsured drivers.”

Often referred to as UI or UIM coverage, these additions to an auto insurance policy will pay for injuries sustained by a driver and his passengers, as well as property damage, resulting from an accident with an uninsured driver. Some states require this coverage, but even if you live in a state that doesn’t, Barry says it’s well worth the extra cost.

“This is definitely something you should bring up when talking to your insurance company representative or agent,” Barry says. “Uninsured motorists are out there, and this is good way to guard against the risk they carry on the road.”

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